UMVA has learned that a heated battle is unfolding between Kalshi, a federally regulated financial exchange, and FairPredicts, a watchdog group accusing the company of operating like a sportsbook.
The conflict escalated with Kalshi sending a cease-and-desist letter to FairPredicts, demanding the removal of an advertising campaign that Kalshi claims contains "false, misleading, defamatory, and commercially disparaging statements" about the company and its related businesses.
FairPredicts launched a Washington advertising push targeting the prediction-market industry, with ads circulating on transit placements and mobile billboards, questioning Kalshi's business practices with the slogan: "If Kalshi is not the house, why do they win when you lose?"
The watchdog group argues that Kalshi's affiliated market-making firm, Kalshi Trading LLC, profits when customers lose money, effectively behaving like "the house" inside the exchange, and accuses the company of weak anti-money-laundering safeguards and misleading advertising.
Kalshi has vehemently rejected these allegations, stating that its affiliated trading operation represents "less than 1% of overall sports trading volume on the platform" and "does not systematically participate in every trade," adding that it operates "at a negative P&L" rather than generating sportsbook-style profits from user losses.
The dispute comes as Kalshi battles several states that argue sports-event contracts resemble unlicensed gambling products rather than federally protected financial instruments, and as lawmakers intensify questions surrounding insider trading and market integrity.
A recent Senate hearing examined concerns involving youth access, manipulation risks, and whether event contracts blur the line between investing and gambling, while federal prosecutors have brought what is believed to be the first criminal insider-trading case connected to prediction markets.
Kalshi's legal notice warned FairPredicts that the campaign could expose organizers to defamation, unfair competition, and tortious-interference claims, while demanding preservation of communications, funding records, and analytics data.
